Check out market updates

Eight Reasons People Can’t Buy a Home

Buying a home—especially if it’s your first—can involve numerous decisions. Here, offers some tips to make sure you don’t make some common mistakes that could wind up undermining your ability to purchase a house.

1. Don’t waiting to line up financing

Your first step in the home-buying process should be to meet with a mortgage lender to discuss your financing options. You never know what you can afford until you meet with a lender. Just because you think you can buy a $1 million house doesn’t mean you can actually get a loan to purchase a home that nice.

2. Never use a fly-by-night mortgage lender

Placing your trust in a bad lender can cause a deal to fall through, with sellers sometimes rejecting offers because of a buyer’s lender. Ensure your financing is rock-solid by asking your real estate agent for lender recommendations. And be sure to read up on the mortgage basics.

3. Get pre-qualified rather than pre-approved

Pre-qualification and pre-approval might sound similar, but they’re not. Essentially, anyone can get pre-qualified for a loan, because it only involves having a conversation with a lender about the state of your finances (no documents are exchanged). Meanwhile, getting pre-approved involves the lender gathering all necessary documentation (tax returns, bank statements, pay stubs and more), packaging the loan and submitting the file to an underwriter for review. If everything checks out, the lender will issue you a written commitment for financing up to a certain loan amount that’s good for up to 90 or 120 days.

4. Stay within your price range

Resist the temptation to shop online for homes that are simply outside of your price range (for example, how much you’ve been pre-approved for).

5. Don’t make lowball offers in a seller’s market

Rely on your real estate agent to determine whether a house that you’re interested in has a fair listing price. (Your agent will do this by performing a comparative market analysis, which entails looking at recently sold properties that are comparable to the house that’s up for sale.) If a home is priced well, it might make sense to offer full price.

6. Never write a bad personal letter to the seller

If you’re competing against other buyers, writing the seller a personal letter can help strengthen your offer. But don’t overshare, in which case a letter can actually hurt your offer. Stick to the fact that you love the house and the neighborhood, and don’t get into personal details—such as the fact that you’ve lost out on other homes or want to remodel the dated kitchen.

7. Avoid making a big purchase while in escrow

Some home buyers make the mistake of opening new credit accounts while they’re in the process of buying a house. However, purchasing a big-ticket item such as a car or a boat while you’re buying a house can jeopardize your financing because your mortgage lender’s underwriter will re-evaluate your finances and recheck your credit report shortly before closing to determine that you’re still able to qualify for the loan.

8. Don’t forget to budget for closing costs

If you don’t have enough cash to cover closing costs, you won’t make it to settlement; and if that’s the case, you could lose your earnest money deposit. Make sure to get an estimate from your mortgage lender of what your closing costs will be before making an offer on a property. Closing costs vary widely by location, but they typically total 2 percent to 7 percent of the home’s purchase price. For example, your closing costs could come to $5,000 to $17,500 on a $250,000 home. Both buyers and sellers usually pitch in on closing costs, but buyers shoulder the share of the load (3 percent to 4 percent of the home’s price) compared with sellers (1 percent to 3 percent), so make sure you have enough cash on hand to pay your portion.